In spite of the cold snap of Q1, the U.S. equity markets managed to deliver handsome returns last year. 2014 turned out to be the third consecutive year of double-digit percentage gains for the first time in more than two decades.

Not only did the markets manage to withstand the harsh winter weather during the first quarter, but they also sailed through geo-political tensions erupting worldwide, global growth concerns including a slowdown in developed markets like Europe and Japan and the oil price havoc (read:Best ETF Strategies for 2015).

While one might be wondering what secret cause led to the rally in the U.S. markets, it indeed was the strengthening economy itself. An improving job market, rising consumer confidence, better corporate earnings and lower interest rates were some of the factors that drove the U.S. markets higher.

While the S&P 500 (SPX) stock index closed the year with a little more than 11% gains, the tech-laden Nasdaq clocked gains of roughly 13.5% and the blue chip Dow Jones Industrial Average (DJIA) index rose 7.5% in 2014.

Though the broad market gains left winners in almost every corner of the U.S. economy, the Biotech sector stood out clearly as a star performer of the year. The NASDAQ Biotechnology index delivered a stellar 34% return in 2014 – emerging as the biggest winner among all the sectors.

Despite some temporary glitches and rough trading in between, encouraging industry trends, increasing merger and acquisition activities, several important product approvals and label expansions, ever-increasing health care spending and an aging population led the sector to easily outperform the broader U.S. equity markets (read: Buy These Top Ranked ETFs on Solid Biotech Stock Earnings).

Below, we have highlighted three ETFs from the biotech space that emerged as top winners. These products could continue with their strong run this year and are worth keeping an eye on to see if they can remain top performers once again:  

First Trust NYSE Arca Biotechnology Index Fund (FBT - ETF report)

The fund rocked 2014 with a stupendous return of 67%. FBT manages an asset base of $2.1 billion and trades in good volumes of 185,000 shares a day.

FBT tracks the NYSE Arca Biotechnology Index to measure the performance of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
 

The fund holds a well-diversified basket of 30 stocks with no stock occupying more than 4.5% of total assets. Isis Pharmaceuticals, Cubist Pharmaceuticals and Incyte Corporation form the top three holdings. FBT charges investors 60 bps in fees per year and currently has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.

SPDR S&P Biotech ETF (XBI - ETF report)

This fund follows the S&P Biotechnology Select Industry Index and holds about 89 securities in its basket. It is quite well spread out across its components with none of the stocks having more than a 1.5% allocation. Raptor Pharmaceutical, OPKO Health Inc and BioCryst Pharmaceuticals form the top three holdings (read: Inside the Two New Innovative Biotech ETFs from BioShares).

The ETF puts more focus on small- and micro-cap stocks at 78% of the portfolio, while mid and large caps account for the rest. The product has nearly $1.4 billion in AUM and sees solid volume of 500,000 shares per day. It charges 35 bps in annual fees and it returned 45% last year. XBI currently carries a Zacks ETF Rank #2 or Buy rating.

Dynamic Biotech & Genome (PBE - ETF report)

This fund provides exposure to 30 firms by tracking the Dynamic Biotech & Genome Intellidex Index. Biogen, BioMarin Pharmaceuticals and Sigma-Aldrich Corp occupy the top three spots with a combined exposure of 16%.

The product has amassed $451.7 million in its asset base while it trades in lower volumes of 60,000 shares per day. The expense ratio comes in at 0.63% and the fund has returned 45% last year. PBE currently has a Zacks ETF Rank #2 or Buy Rating (read: The Complete Guide to Biotech ETFs).